Posts in Blog
Theranos: Not The Future Of MedTech Investing
 

You’ve heard story after story about how Theranos, once the darling of medical technology investors, has put a damper on medtech investing. How so many private placements lost 100s of millions of dollars. That accredited investors, including what MarketWatch called a Who’s Who of Stanford University alumni and distinguished military veterans. “Tim Draper, Larry Ellison and Rupert Murdoch were among the high-profile investors,” it stated. 

If people like the former Secretary of State, the CEO of Wells Fargo, and the current Secretary of Education can all be caught with their pants down, how do ‘I’ protect myself from enormous loss?

Trust but verify

Initial investors were exclusively private placements. Venture capital firms were approached butmany initially passed on the opportunity because of the CEO’s unwillingness to share information about the blood test technology and results, and due to the lack of established scientific support for it via peer-reviewed research. Marketwatch also stated that the company and its board lacked medical and scientific experience, which would of course be critical to its success.

When considering an investment, don’t be wooed by the claims.  Ask every question you can think of to determine the efficacy of the product.  Speak to the people who did the research, or at least read the papers they published. Look for candor in the management team. Assure access to audited financial information. 

Most companies that provide you with data are real, but it might be that one time you don’t check that trips you up. If their studies are comprehensive, if they stand by them, they should not hesitate to share the sources with you.

Someone who knows what they’re doing

Bill Maris of GV (formerly called Google Ventures) was interviewed by Business Insider about this topic in 2015. They passed on the opportunity to invest in Theranos for a myriad of reasons, but when asked about whether they see this as indicative of the need to slow down on medical technology investments he replied, “those of us who know what we’re doing, know what we’re doing.” VCs are in the business of taking chances, and generally have team members who come from the world of medicine and technology if that’s a sector in which they invest.

The valuation standards in medical technology are a different set than in other sectors. Be sure you have access to someone who can explain the unique measurement, a professional with a methodical approach to research and assessment. Do not be scared off by others’ losses, especially when those losses are directly attributable to investors’ lack of research.

Medical technology is a dynamic world, wide open to amazing breakthroughs. We see it every day – companies who have developed what could literally be life-changing solutions for different sets of populations. That’s why Zoic is laser-focused on medical technologies, and why we’ve built our company to represent the insights needed to understand the viability and the marketability of each investment.

 
Blog, MedTechNeal Mody
Healthcare: High Profile Collaborations
 

In early 2018, the announced collaboration between Jeff Bezos (Amazon), Warren Buffet (Berkshire Hathaway), and Jamie Dimon (JPMorgan Chase) set the health and financial sectors abuzz with speculation over what they might (or might not) be able to accomplish in health sector innovation. And, it should. Any collaboration between 2 of the three wealthiest people on the planet and 3 CEOs presiding over some of the largest companies both in their industries and in the world has transformational implications. Healthcare finance and delivery reform in the U.S., however, has claimed more failed efforts than the metaphorical Bermuda Triangle has planes, so a generous dose of skepticism seems in order. So, what might the collaboration reliably yield?

1) Delivery

Radical delivery transformation is certainly possible.

Amazon computing power and technology is well-poised to create a robust telemedicine platform supported by AI-assisted clinicians providing maintenance care at a distance for patients with chronic conditions. This could dramatically lower clinician cost, eliminate travel time/expense, and expand telemedicine access to not only acute care, but also routine maintenance care to 24 hours a day, 365 days per year availability. Such services could be both Amazon-provided and branded or the platform infrastructure could be provided at lower marginal cost to health systems and provider groups who contract for them much like Amazon Web Services provides affordable platform technology to a host of industries.

It would also be easier through this collaborative than in the general public to leverage Amazon’s tech (or to fund startups with the technology) that can provide patients low-cost, in-home, point-of-care monitoring solutions (i.e. Bluetooth scales, glucometers, blood pressure monitors, cardiac rhythm monitors, etc.) to a) collect real-time data, b) apply AI to analyze and predictively model the data, and c) intervene for patients with high cost disease states (i.e. CHF, COPD, diabetes) to prevent or substantially minimize decompensation through more rapid interventions to prevent decompensation and avert preventable hospitalizations.

2) Financing

A large collaborative like this, with the aggregate financial acumen of the three companies plus the large healthcare budgets they already deploy, could make profound inroads into healthcare for their own combined >1.2 million employees. With sufficient coordination, the three corporations could adopt a much more wholistic approach with the result that it becomes single-payer and single-provider for routine preventive, maintenance, and remote monitoring of care for most common conditions using tools as described above. The companies would then only contract out for acute procedural and in-hospital services. Doing this, they would save substantial expense by eliminating 3rd-party health insurer and numerous outsourced provider expenditures. These savings could be sufficient to provide all their own employees much lower or no-cost healthcare coverage for all employees who consent to use the prescribed services and comply with the in-house delivery system requirements as a condition of receiving the no-cost health coverage option. There may even be enough money left to pay these employees some modest incentive to choose this path.

Extending the scenario above, the pricing system for contracted provider services, pharmaceuticals, and devices has been irretrievably broken. Long ago, it ceased to be a fee charged and paid in return for a discrete product or service provided. It is now an opaque web of wildly inflated charges, insanely discounted rates, rebate/refund programs as complex as collateralized debt obligations (CDOs), a tangled knot of distributors, etc., etc. This collaborative might have enough scale to strip out much of this of this waste and return to a cleaner model of cash exchanged for goods without so much tangled mess in the middle.

3) The Big Picture

Improving the healthcare value proposition requires at least a handful of key events to occur:

i) Sufficient aggregation of financing layers is required to eliminate as many intermediary costs as possible. If done at scale, this could effectively wipe-out the entire private health insurance industry, most of the revenue-cycle industry, much of the bricks & mortar pharmacy industry (why would we need so many drugstores if Amazon can home-deliver medication within 2 hours), etc., etc. This alone would be transformative to healthcare financing and delivery.

ii) Nearly compulsory leveraging of telemedicine, in-home monitoring, AI-enhanced predictive analytics, and rapid interventions by lower cost clinicians or team members would be essential. The pseudo-compulsory aspect would be facilitated by corporations offering employees incentives (no- cost healthcare plus cash or other positive incentives) to use these preferred services rather than bricks & mortar physician offices, hospitals, pharmacies, etc. unless the company delivery system advises and authorizes it (or in case of acute injury / emergency).

iii) Facilitated and/or mandated patient compliance with treatments and/or requirements. Remote monitoring and review of use patterns would reveal employees who repeatedly fail to comply or who use non-preferred care avenues. Repeated non-compliance could result in imposition of employee cost-sharing for healthcare coverage/services and/or other interventions.

Many of the above items are industry-transforming – every bit as much as iTunes was for music and Amazon has been for retail. Some of the above is easy to model and deliver, but other parts are much more difficult and would be a daunting challenge to scale outside the captive employee base of the three collaborating companies. It’s far from impossible, though. Amazon is the key to much of this because it can leverage its tech, scale, and razor-thin margins (tiny cut of a massive amount) to make its profit while still saving money for others. Initially, Berkshire and JPMorgan appear less critical, but their size and scope undeniably add to the potential experimental pool (i.e. employees) and could be helpful enlisting other corporations to join in if these initiatives show early signs of success.

These concepts could radically transform healthcare delivery and financing. Though it’s anyone’s guess how much of it they can accomplish and in what timeframe, being the CEO atop such a collaboration would be a fascinating job!